Morning Thoughts From the G10 FX Desk

From the FXWW Chatroom: Risk trades off the highs as the Oil price dips (Kuwait oil workers’ strike finished) and Shanghai stocks fall 4% as stories of cash payments taking up to 192 to be received circulate suggesting that default risks are increasing. We are running very light and aren’t convinced that the recent US$ downturn can be convincingly reversed without Fed assistance but positioning in some ccys seems to outweigh fundamentals so we are selective in our US$ shorts.

Sterling stays well supported as we head into this morning’s employment data. Strats suggest the u/e rate will stay at 5.1% but focus remains on wage growth. EUR/GBP trades back above 79c as equities slide but we are still cautiously optimistic on the Pound.

USD/CAD trades well off yesterday’s 1.2631 lows on the back of weaker oil but recent price action suggests that rallies back to 1.2750 may be sold into. Not looking for too much today and think 1.2650/1.2750 should hold us into the Oil inventory data this afternoon.